Hold on to your wallets, folks, because we’re about to dive into the fascinating world of credit cards and the companies that issue them. You might be surprised to learn that credit card companies actually have a special nickname for customers who pay their balances in full each month: deadbeats.
Now before you start picturing yourself as a delinquent debtor, let me assure you that this term is used in a tongue-in-cheek way. In the eyes of a credit card company a deadbeat is a customer who consistently avoids paying interest charges and fees by diligently paying off their balance in full. While this might seem like a dream come true for consumers, it’s not exactly what credit card companies are hoping for.
Why Credit Card Companies Prefer Balances (But Not Really)
Honestly, credit card companies are businesses, and like any other, their main objective is to turn a profit. They make money in a number of ways, such as through transaction fees, annual fees, and interest charges. You’re effectively taking out a short-term loan when you have a balance on your credit card, and the credit card company profits from you through interest charges.
However, it’s important to remember that credit card companies also want to maintain a healthy customer base. They know that if they make it too difficult for customers to pay off their balances, they risk losing them to competitors. That’s why they offer various incentives, such as rewards programs and introductory 0% APR offers, to entice customers to use their cards and carry balances.
So, what’s the bottom line?
Credit card companies would prefer that you carry a balance and pay interest, but they also don’t want to lose you as a customer. They’re constantly walking a tightrope between maximizing their profits and keeping their customers happy.
The Benefits of Paying Your Credit Card in Full
Now, let’s talk about the benefits of paying your credit card in full each month. This is arguably the most responsible way to use credit cards, and it can have a positive impact on your financial well-being in several ways:
- Avoid interest charges: This is the most obvious benefit. By paying your balance in full, you’ll avoid paying hefty interest charges that can quickly add up.
- Improve your credit score: Your payment history is a major factor in your credit score, and paying your bills on time is one of the best ways to improve it.
- Reduce your debt: Carrying a balance on your credit card is a form of debt, and paying it off in full helps you reduce your overall debt load.
- Gain peace of mind: Knowing that you’re not accruing interest charges or late fees can give you peace of mind and reduce financial stress.
The Bottom Line: Deadbeats Rule!
While credit card companies might not be thrilled about customers who pay their balances in full, it’s the best way to use credit cards responsibly and avoid unnecessary debt. So, embrace your inner deadbeat and enjoy the financial benefits of paying your credit card in full each month.
Remember:
- Credit card companies make money by charging interest and fees, but they also want to keep their customers happy.
- Paying your credit card in full each month is the best way to avoid interest charges and improve your credit score.
- There’s no shame in being a “deadbeat” when it comes to credit cards. In fact, it’s a smart financial move.
Now go forth and conquer your credit card debt!
The Bad News for Deadbeats
I’m sorry to break the bad news, but the industry has discovered a means of penalizing noncompliant customers. Some innovative financial strategist has earned their pay somewhere. Two customers have contacted me in the last two months to report that they were charged for having a zero balance. A fee for not using their credit card service.
Unfortunately for both, they incurred late fees for the zero balance fee as well. Why hadn’t they checked their statement since they knew they had paid off the card but hadn’t used it? Both were able to complain and have the zero balance fees removed. Both still had to pay the late fees.
Only after receiving notice of a pending charge-off did they call their credit card provider. A charge-off is when an account provider has attempted but failed to collect payment on their account. They charge off the debt from their books and sell the account to a third-party debt collector for a small sum in order to close their files.
The customer service representatives they spoke with each said that the notice they both ought to have read was sent to them last summer. A credit card company must notify you if the terms of your agreement are changing. They give you 45 days to opt out and close your account. If you don’t, they assume you have accepted the terms. Actually, you most likely never even glanced at the email or the note on the back of your paper statement, just like these two did.
Strive to be a Deadbeat
The good news is – I’m telling you it is okay to be a deadbeat. The best way to get the most out of a credit card and minimize any negative effects is to use credit wisely, just like the proverbial deadbeat does. Simply said, deadbeats can beat the credit card system. That’s why they are not the preferred customer of the credit card company. Customers who are prepared to make the bare minimum payments for the longest possible terms at the highest interest rate they can afford are given preference. These are their best clients, and they will be happy to give them more credit so they can increase their profits.
Your best bet to earning deadbeat status? Follow these simple rules:
- Look for a credit card without an annual fee. They do exist.
- Use that card only for purchases you are certain you can afford to make in full when the monthly statement comes in.
- Pay that monthly statement in full before the due date. As a matter of fact, some electronic bankers treat their credit cards like debit cards. Instead of waiting for the monthly statement, they accomplish this by paying for each transaction as it is incurred. They make monthly payments, which are deducted immediately and electronically from their funding account.
Doing these three things can help maximize the perks offered on the card. It can also help you better manage your monthly expenses and live within your means. Best of all, a good payment history will help build a solid credit score.
What the Credit Card Companies Don’t Want You To Know
FAQ
Is it bad to pay credit card in full?
Is it bad to max out a credit card and pay it off immediately?
Do credit card companies make money if you pay full?
Do credit card companies want you to pay off balance?
Should I pay off my credit card every month?
Even if you pay off your card each month, don’t be surprised if your credit report still shows a balance. Typically, the statement balance on your monthly bill is reported to the credit bureaus. You could pay the balance before your statement date if you’re concerned about the balance’s effect on your credit.
Should you pay your credit card balance in full a month?
When you pay your balance in full each month, the credit card company doesn’t make as much money. If it weren’t for merchant fees paid by the stores where you use your card, your credit card would be a waste of 16-digits. You’re not a profitable cardholder, so, to credit card companies you are a deadbeat.
Do credit card companies make money off Deadbeats?
According to J.D. Power’s U.S. Credit Card Satisfaction Study from August 2023, 49% of U.S. cardholders say they pay their balances in full each month. Credit card companies still make money off deadbeats — also known as “nonrevolvers” and “transactors” — mostly through annual fees and the transaction fees paid by merchants they patronize.
Can you pay off your credit card debt in full?
Interest accumulates daily on most credit cards, and coupled with high APRs, it’s a recipe for expensive debt. Let’s say you’ve bought a $1,400 laptop and charged it to your credit card. You could pay off the $1,400 balance in full but that would mean giving up breathing space in your budget for the month.